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Informist, Tuesday, Oct. 6, 2026

MUMBAI – The following are economists' expectations from the Reserve Bank of India's Monetary Policy Committee meeting, which began Monday. The committee's decision will be announced Wednesday.

ANZ BANKING RESEARCH

India's domestic economic conditions and the relevant global backdrop now point to a higher policy repo rate. We expect the RBI to hike by 25 bps in October, followed by further 25 bps increases in December and February, taking the terminal repo rate to 6.00% by the end of 2026-27 (Apr-Mar). 

GDP data and high-frequency indicators show India's activity momentum remains sturdy despite risks. Growth is balanced across domestic and external demand, while recovering private investment makes the expansion more durable. Limited pass-through from higher input costs has so far contained the drag from the energy shock, and a likely positive output gap by Jul-Sept gives the central bank room to prioritise inflation while growth remains firm. 

With core firming, higher food and fuel prices could keep headline inflation above the 4% target for longer than policymakers would find comfortable. Headline inflation could breach 6% in Jan-Mar. We now expect FY27 inflation at 5.1% and FY28 at 5%, signalling persistence. Producer Price Index and Wholesale Price Index inflation above 9% year-on-year also show pipeline price pressures are acute. 

BARCLAYS

We expect the RBI Monetary Policy Committee to begin the tightening cycle and raise the policy repo rate by 25 basis points to 5.50% at the upcoming meeting, while retaining the stance as "neutral." We had long held the view that RBI would delay the first hike to December, as inflation generalisation was far from feared, festive season is around the corner and a large liquidity surplus could delay transmission of an immediate hike. There are two reasons why we are changing the timing of rate hikes to October and December, from our earlier expectation of December and February 2027: 1) Attuned to the current reality of elevated global oil prices, we expect the RBI to revise its inflation forecast up from the 5% average CPI forecast in August, and 2) Growth outperformance in the Apr-Jun quarter and still robust high-frequency indicators for July-August indicate that the RBI will need to revise its growth forecast up from the 6.7% year-on-year in August. Upward revisions to both the growth and inflation forecasts offer a solid backdrop to commence a monetary tightening cycle.

We see the tightening cycle as "monetary policy calibration" responding to "inflation normalisation." Therefore, we expect the terminal rate for this cycle to be 5.75%. In our view, the first hike would be announced alongside a "neutral" stance, allaying any concerns that this is a steep hiking cycle, and with a second/final hike, announced in December, we would expect a change in stance to "calibrated tightening" to accompany the rate hike decision. In our view, the MPC would refrain from indicating a series of hikes and keep its optionality by retaining the neutral stance we forecast in the October meeting.

BOFA SECURITIES

After almost two years of monetary accommodation, the RBI appears set to take early steps to start withdrawing the policy support in October MPC. The RBI has in the August MPC minutes itself given a preface to this move, and we further believe that the incoming data on domestic inflation and growth, coupled with a global backdrop of higher US rates and commodity prices provides little room to wait. As such, we now believe that the RBI will go ahead with a rate hike of 25 bps in October MPC.  

EMKAY GLOBAL FINANCIAL SERVICES

We expect the RBI to kick off the rate hike cycle with a cautious 25 bps increase, while retaining a neutral stance and signaling a higher-for-longer rate environment; a 50 bps hike remains an outside risk as tighter global financial conditions increasingly shape the RBI's reaction function. Inflation is emerging as the key concern, with pressures broadening beyond food and our Oct-Mar forecasts running ~20 bps above the RBI's projections. Meanwhile, FCNR-led excess liquidity continues to keep monetary conditions accommodative despite a tactical mix of sterilization tools, making liquidity management an ongoing challenge. The October policy should offer greater clarity on the RBI's sterilization strategy, with a further OMO sales announcement possible.

ICICI BANK

Since the last policy, the global landscape has changed with higher policy rates and yields given buildup of inflationary pressures when growth is holding up led by tech boom. India's growth too has exceeded estimates in Apr-Jun with housing finance institutions showing growth holding up in Jul-Sept as well. Higher exports should balance out some of the impact of a below normal monsoon. However, deficient rainfall will push food prices higher when a broad-based increase in international commodity prices is visible in sequential uptick in core (ex-precious metals) inflation. Hence, repo rate should go up by 75 bps to maintain real rates in 1.4-1.9% range unless global energy prices see a sharp drop in coming months thus requiring lower magnitude of hikes (50 bps). Given the global uncertainty, it is best for MPC to remain data-dependent (neutral stance). Liquidity absorption via spot operations and OMOs (1-2 year maturity) should be preferred along with any temporary durable liquidity measure to smooth out inter-temporal variation in liquidity. 

KOTAK MAHINDRA BANK

Pressure on India's external balances remains contained, despite recent volatility and higher crude prices. Inflation risks remain skewed upward from food prices due to poor monsoon and elevated energy prices, though we do not expect retail fuel price hikes for now. The RBI is likely to continue withdrawing liquidity through a mix of OMO sales and FX interventions, with the latter also supporting the rupee. We expect a 50-75 bps rate hike cycle, with a 25 bps hike likely in the October policy. 

MORGAN STANLEY

The combination of a firm domestic growth-inflation mix and tighter global financial conditions warrants an earlier start of policy rate hikes. We have highlighted the risk of an earlier start;  we now expect the RBI to begin hiking in October and tighten a cumulative 100 bps through four consecutive 25 bps hikes, taking the terminal policy rate to 6.25% by April 2027. We view the rate hike cycle primarily as policy normalisation rather than disruptive tightening, aimed at reanchoring real rates, containing second-round inflation risks, preserving inflation expectations, and supporting external stability. 

NIRMAL BANG INSTITUTIONAL RESEARCH

We expect the RBI to hike rates by 25 bps at its October policy meeting following in the footsteps of global central banks on signs of broad basing of inflationary pressures amid resilient growth. We expect a relatively shallow rate-hike cycle of around 50-75 bps; consequently, this is unlikely to warrant a change in stance from neutral. We believe that volatile times demand a nimble playbook, which can be accommodated by a neutral stance. While the liquidity surplus has moderated from highs, we believe some additional liquidity measures are likely, which could be a mix of issuance of cash management bills, a temporary hike in the cash reserve ratio with a sunset clause, FX sell-buy swaps, and variable rate reverse repos. Open market operation sales would be the least preferred option in our view as it would add to the pressure on bond yields. CPI inflation is likely to rise to 5.53% in September on a low base, with persistence in food inflation and some signs of broadening of inflation beyond food and fuel although still contained. Core CPI is seen at 4.55% in September versus 4.44% in August while core CPI (excluding gold, silver, petrol, and diesel) is seen at 3.11% in September versus 2.82% in August.

NOMURA

The RBI's monetary policy is at an inflection point. Markets are pricing close to 125 bps of rate hikes over the next one year, but our analysis suggests this cycle is fundamentally different. India's trend inflation has moderated, Nomura's inflation generalization index confirms no signs of broadening, and our leading index is signalling below-trend growth ahead. We expect the cyclical pressures from food and energy prices to push up inflation over the next six months, but as they dampen demand, inflation should return to target. We forecast CPI inflation at 5.2% in FY27, before easing to the midpoint target of 4.0% in FY28. Given limited signs of generalisation, a full tightening cycle is unlikely. We expect 25 bps hike in October and December to a terminal rate of 5.75% as a preemptive recalibration to anchor expectations. The RBI will do less in this cycle, not more.

YES BANK

The recent uncertainties of global geopolitics do not indicate an easy path for policymaking. Minutes of the August policy suggested that members await "generalization of price pressures" before any policy action. A lot has changed since then, including higher oil prices, start of a synchronised rate hike cycle, and continued INR depreciation pressures despite swap window flows. The most important development, in our opinion, is a broadening of inflationary pressures as is indicated by the Diffusion Index. Our forecasts indicate possibility of Jul-Sept inflation surpassing RBI's forecast of 4.7% and trending closer to the upper bound of 6% as manufacturers pass on higher input costs to consumers. Further, steady growth could provide comfort to the RBI to start its hiking cycle. We expect the stance to remain at "neutral", signaling a short cycle to normalise rates rather than a sharp tightening.  End

US$1 = INR 96.41

Compiled by Pratiksha

Filed by Avishek Dutta

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